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Tuesday, September 14, 2010

Jobless are straining Social Security's disability benefits program

The number of former workers seeking Social Security disability benefits has spiked with the nation's economic problems, heightening concern that the jobless are expanding the program beyond its intended purpose of aiding the disabled.

Applications to the program soared by 21 percent, to 2.8 million, from 2008 to 2009, as the economy was seriously faltering.

The growth is the sharpest in the 54-year history of the program. It threatens the program's fiscal stability and adds to an administrative backlog that is slowing the flow of benefits to those who need them most.

Though policymakers anticipated the program's rolls growing with the aging of the baby-boom population, they suspect the current surge has less to do with any worsening in the health of the workforce than with the poor health of the economy.

About half of all applicants eventually make it onto the disability rolls - a percentage that has not changed appreciably with the recent spike in applications, Social Security officials say. The average age of new recipients is 49 - and less than 1 percent of them return to work, according to the Congressional Budget Office.

Social Security officials say they are confident that their vetting process screens out most people who might try to get benefits without being qualified. But, they acknowledge, when jobs are scarce, more workers who might otherwise struggle through with their ailments try to secure disability benefits.

In bad times, the disability rolls are swollen by "a lot of older workers who are very much on the margins. Often, they are the first people laid off," Social Security Commissioner Michael J. Astrue said. "They can't find any new work and they are desperate. So they have every incentive to try and get in the program."

Applicants must endure a cumbersome process in which government claims examiners, administrative law judges and sometimes federal courts weigh whether they meet the program's standard of having a disability that prevents them from performing "substantial" work.

The vast majority of applicants turn to a network of lawyers and other advocates to help them fill out the bewildering forms, organize their medical histories and categorize their illnesses in a way that would increase the chances of getting aid.

If applicants are turned down, the counselors - who typically work on a contingency fee that is capped at $6,000 - represent them through the appeals process.

"A lot of people come to me when their unemployment benefits run out and they have no where else to turn," said Paul W. Nolan, a Baltimore lawyer who specializes in Social Security disability cases. "Many of them are on the border. Maybe in their last job, people were willing to work around their disability. But the economy is less forgiving of disabilities during a recession than when times are good."

Deciding exactly who can and cannot work is an imperfect science, at best. A generation ago, most disability awards went to applicants suffering from cancer or from heart ailments. But now, more than half of awards go to applicants who claim mental disabilities, such as depression, or musculoskeletal disorders, such as back pain, which are harder for federal officials to disprove.

"Reasonable people can disagree about a lot of the cases," Astrue said, noting: "[But] we have kept our standards exactly the same."

Unlike applicants for Social Security's Supplemental Security Income program, which is aimed strictly at the poor, those vying for the disability program are required to have a substantial work history and a medical issue that prevents them from holding a job for at least a year. SSA turns over the applications to state agencies charged with examining the claims.

Social Security officials say that fewer than 40 percent of applications are approved at that level, typically in just over 100 days. Rejected applicants can ask for reconsideration or appeal to an administrative law judge and, eventually, to the federal courts. Although only a third of applications are appealed, a large majority are reversed.

"It is difficult to navigate that process," said Ethel Zelenske, director of government affairs for the National Organization of Social Security Claimants' Representatives, a 4,000-member organization of advocates who represent applicants in the disability application process. "The allowance rate for people represented at the hearing level is much higher than it is for people who are unrepresented."

The flood of new applicants is slowing the approval time, which can extend beyond two years in an appeal. And despite the addition of new case examiners and administrative law judges, the SSA has struggled to keep pace, a situation Astrue called unacceptable because it slows benefits to people who are economically desperate.

The crush of new enrollees is placing an unsustainable financial burden on the Disability Insurance Trust Fund. Currently, the program costs $124 billion a year. Absent changes, the fund, which is financed mostly by a 1.8 percent payroll tax, is projected to be exhausted by 2018.

In the past, lawmakers have addressed such shortfalls by transferring money from Social Security's retirement fund. But now that move could prove politically fraught, given the growing concern about the future viability of the retirement program.

The recent enrollment surge has accelerated the growth that the disability program had already experienced over the past few decades.

Economists say the program has grown because eligibility rules were loosened in the 1980s. Moreover, the least-educated segments of the workforce, whose job security has dwindled, are applying in disproportionate numbers for disability.

Between 1984 and 2004, the percentage of male high school dropouts between ages 40 and 54 on the federal disability program rose from 5.4 to 7.8 percent. Those former workers were twice as likely as male high school graduates and five times as likely as male college graduates to receive disability benefits, according to an analysis by University of Maryland economists Mark G. Duggan and David H. Autor, a Massachusetts Institute of Technology economist.

Social Security disability payments average about $1,100 a month, with benefits for spouses and children averaging about $300 a month more. In addition, people on the disability rolls receive health insurance through Medicare once they have been on the program for two years.

The benefits are modest. But so is the median wage for high school dropouts, which is $440 per week, according to the Labor Department. The median wage for all workers, meanwhile, is $740 per week.

As a result, economists say, many low-wage workers who struggle with health problems have fewer incentives to remain attached to the labor force.

"The current SSDI system sends a negative message to disabled Americans that they are not valued members of the labor force by making it impossible for them to draw any benefits and work, even part-time," said Michael Greenstone, director of Brookings Institution's Hamilton Project, which is helping to develop possible reforms for the program. "We need to change the incentives around SSDI to reward work."